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Tennessee Citizens Lose as New Law Leaves Thousands Without a Vital Lifeline

[June 26, 2014]

Tennessee Citizens Lose as New Law Leaves Thousands Without a Vital Lifeline

NEW YORK --(Business Wire)--

The American Legal Finance Association (ALFA) announced today that the
majority of its member companies are expected to cease serving customers
in the state of Tennessee following the enactment of recent legislation
taking effect July 1, 2014. SB-1360, which Governor Bill Haslam signed
on April 29th, places unprecedented price controls and other
anti-business measures on a funding source relied upon primarily by
citizens in need of temporary financial assistance for everyday expenses
while recovering from injuries in auto accidents, slip and fall
injuries, medical malpractice, and other personal injury and tort claims.

"We told lawmakers that the industry would have no choice but to cease
service to Tennessee customers, which is exactly what we are expecting
as this legislation takes effect next month," said ALFA Chairman Harvey
Hirschfeld. "Customers utilize pre-settlement funding in order to pay
for everyday expenses while negotiating fair settlements with insurance
carriers, and now Tennessee citizens will no longer have access to this
funding source. The only winners are billion-dollar insurance carriers
that now have even greater leverage over injured Tennessee citizens
seeking fair settlements."

Hirschfeld explained that legal funding is a product that helps
individuals injured in an accident who have both a pending legal claim
and are represented by an attorney, by providing them debt-free,
non-recourse financial assistance to help them make ends meet while they
wait for a fair settlement to be reached in their case. These needs
usually arise when an individual has been in an accident, usually at no
fault of their own, that leaves them out of work with limited financial
resources to pay bils or put food on the table - all while awaiting
their legal claim to be heard. The funding helps to bridge gaps in
personal expenses due to the injury and is not used to file "frivolous
claims" as industry critics have stated.

SB-1360, which instituted price controls on the amount a private
business could charge for the transaction, was fought by a bipartisan
group of legislators in the Tennessee House of Representatives before
the legislation was narrowly approved on April 3. According to industry
sources, the Tennessee law's price control provisions would effectively
force the industry to operate at a loss. ALFA members have indicated
that they have begun the process of notifying customers and employees
that they will be winding down their Tennessee operations immediately.

Dan Cleary, operator of Nashville-based legal funding company, Provident
Litigation Funding, Inc., stated, "I am an entrepreneur that has
successfully served Tennesseans without incident for 13 years. I am
shocked and appalled by the success out of state insurance companies
achieved by using the Tennessee legislature to bully my locally-built
company."

In addition to the price control provisions within SB-1360, the law also
includes two other provisions designed to drive the industry from the
State: an anti-assignment provision preventing a legal funding company
from utilizing their bank lines to fund the transaction, and a provision
which states any (and all) liens take priority and must be satisfied
before a legal funding company is to receive funds - no matter who
writes the lien or when the individual grants the lien.

ALFA Executive Director Kelly Gilroy added "The intent of this
legislation is not aimed at protecting the citizens of Tennessee but is
targeted at shutting down the industry. Using the legislative process to
favor one business at the expense of another is contrary to America's
free enterprise system. It is especially harmful when a valued product
is denied to customers through this process. Our members can't operate
their businesses at a loss, and they have no choice but to exit the
business in Tennessee, leaving citizens as the real losing party."

American Legal Finance Association

The American Legal Finance Association is made up of forty of the
country's leading legal funding companies, who work toward a mutual goal
of ensuring fair, ethical, and transparent funding standards in the
legal funding industry. All ALFA members sign and adhere to a "Best
Practices" code of ethics, and the organization works proactively with
state policy-makers to establish legal and regulatory guidelines for the
industry as a whole. By helping to establish a regulated, fair system,
ALFA has helped ensure a successful and functioning free market that
continues to expand and helps more Americans every day.